Structuring Token Issuance Based on the Business Model
Once the tokenization model has been selected, the issuer must structure the issuance to reflect that model’s financial, legal, and investor parameters. This includes selecting the appropriate token type -whether it represents equity, debt, revenue participation, or a hybrid structure - and ensuring that the rights granted to token holders are clearly defined and legally enforceable.
Each tokenization model is not only a funding strategy but also a legal and financial structure. The tokens issued must accurately represent the underlying rights promised to investors, comply with jurisdictional regulations, and be compatible with trading and reporting mechanisms.
Objective
Align the selected tokenization model with a token structure that is compliant, enforceable, and appropriate for the asset type, jurisdiction, and investor class.
This includes:
Selecting the correct token type (Security, Utility, or Hybrid)
Defining the token subtype (e.g., equity, bond, participation certificate)
Embedding investor rights (ownership, revenue share, fixed income, governance, etc.)
Ensuring legal compatibility with the chosen jurisdiction and investor profile
Issuer Guidance
Choosing the right token structure is essential to avoid:
Misclassification under securities laws
Inability to onboard retail or institutional investors
Failure to list on regulated exchanges
Enforcement risk or investor litigation due to misrepresentation of rights
The structure you choose must be reflected consistently across:
The token smart contract and metadata
Offering documents and disclosures
Legal agreements (e.g., participation agreements, subscription docs)
Regulatory filings and licensing applications
Token Structure Framework
The table below provides a mapping between the business model selected in Step 9 and the corresponding token type, subtype, and core investor rights.
Full Asset Sale Model
Security Token
Equity or Asset-backed Token
Ownership of the asset, voting rights, capital appreciation
Business Growth Capital Model
Security Token
Equity Token
Company shares, voting rights, dividends/profit participation
Capital Raise for Future Acquisition
Security Token
Convertible or Hybrid Token
Right to future equity or profit, conversion at defined events
Development and Value Creation Model
Security Token
Project Equity or Profit-rights Token
Share in future project value or profits, limited control
Shared Ownership Model
Security Token
Fractional Ownership Token
Co-ownership rights, share of proceeds upon sale or income
Revenue or Profit Sharing Model
Security Token
Revenue/Profit-sharing Token
Right to receive a share of revenue or profit (no ownership or voting)
Loan-Based Fundraising Model
Debt Token
Fixed-income Token
Right to repayment with interest, no ownership or governance rights
Collateralized Lending via DeFi
Utility or Hybrid Token
Collateral-backed Token
Claim on collateral if borrower defaults, interest earnings (if lender)
Utility & Hybrid Token Considerations
Although most STOs are structured as security tokens, in some ecosystems, additional tokens may be used for:
Access to platforms, services, or rewards (Utility Tokens)
Governance participation in DAOs (Governance Tokens)
Combining financial rights with ecosystem roles (Hybrid Tokens)
Note: Security tokens are currently the only available option. The information is currently provided for educational purposes only.
Ecosystem access
Utility Token
Platform Access Token
SaaS access, feature activation, user tiers
Governance participation
Utility Token
Voting/Governance Token
DAO decisions, community voting rights
Web3 staking + profit share
Hybrid Token
Staking Token
Ownership + APY from platform activities
Convertible debt/equity
Hybrid Token
Convertible Token
Starts as debt, converts to equity on trigger
Important: Utility tokens must not offer financial return; otherwise, they may be reclassified as securities. Hybrid tokens should be issued with caution and professional legal review.
Issuer Checklist
Before finalizing token issuance:
Have you selected a token subtype that matches your business model?
Are the investor rights (ownership, yield, control) clearly reflected in the tokens and agreements?
Does your chosen jurisdiction permit this token type and structure?
Is the token eligible for secondary market listing or compliant custody solutions?
Are there any restrictions on offering this token type to certain investor classes?
Example: Participation Certificate Variant
In jurisdictions where direct equity tokenization is restricted (e.g., Switzerland and Germany), issuers may use a Participation Certificate structure:
Legal shares are held by an SPV or nominee
Tokens represent economic rights (dividends, exit value)
Rights are governed by a legally binding participation agreement
This allows for fully compliant issuance without amending national shareholder registries.
Was this helpful?